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Buenos Aires - Argentina's president is refusing to go along with a US judge's ruling requiring a $1.5bn repayment of defaulted bonds, even though the US Supreme Court rejected her government's appeals and left the order in place.

In a national address on Monday night, Cristina Fernandez repeatedly vowed not to submit to "extortion", and said she had working on ways to keep Argentina's commitments to other creditors despite the threat of losing use of the US financial system.

Her hard line came hours after the justices in Washington refused to hear Argentina's appeal, and it could be a last effort to gain leverage ahead of a negotiated solution that both sides say they want.

But with only days before a huge debt payment ordered by the court is due, many economists, analysts and politicians said the country's already fragile economy could be deeply harmed if she didn't immediately resolve the dispute.

Refusing to comply with rulings that have been allowed to stand by the US Supreme Court "would be very damaging to the Argentine economy in the near future," said Miguel Kiguel, a former deputy finance minister and World Bank economist in the 1990s who runs the Econviews consulting firm in Buenos Aires.

Economic independence

Argentine markets were already reflecting fear. The Merval stock index dropped 11% after the court decision, its largest one-day loss in more than six months, and the value of Argentina's currency plunged 33% on the black market.

Fernandez urged her countrymen to "remain tranquil" in the days ahead.

Bowing to the US courts would force her to betray a core value that she and her late husband and predecessor, Nestor Kirchner, promoted since they took over the government in 2003: Argentina must maintain its sovereignty and economic independence at any cost.

But a chorus of analysts said that if she complied with the ruling, it would become much easier for Argentina to borrow again, rebuilding its reserves and preventing the recession from getting even deeper.

US District Court Judge Thomas Griesa order requires that $1.5bn be paid "all together, without quotas, right away, now, in cash, ahead of all the rest" of bondholders, Fernandez said.

"This represents a profit of 1 608%, in dollars!" she complained. "I believe that in all of organised crime there has never been a case of a profit of 1 608% in such a short time."

Ready to negotiate

But Fernandez also said repeatedly that her government is ready to negotiate with the "speculators" who scooped up Argentine junk bonds after the country's 2001 default. Owners of more than 92% of the nearly worthless debt agreed to accept new bonds worth much less than their original face value, but investors led by New York billionaire Paul Singer held out and litigated instead, seeking to force Argentina to pay cash in full plus interest.

Singer's NML Capital Ltd has now won in the US courts — and if Argentina doesn't hand over $907m to the plaintiffs in the next two weeks, the judge will order US banks not to process Argentina's June 30 payment totaling an equal amount to all the other bondholders.

Fernandez said her government "will not default on those who believed in Argentina." But analysts have questioned whether holders of restructured debt would accept payments outside the U.S. financial system.

"Some people say, 'Why don't you pay them and end all this right now?'" the president said. "It's because there's another problem, even more serious. There's another 7 percent who would be able to demand payment from Argentina, right away and now, of $15bn. That's more than half the reserves in the Central Bank. As you can see, it's not only absurd but impossible that the country pays more than 50% of its reserves in a single payment to its creditors."

Existing creditors

"It's our obligation to take responsibility for paying our creditors, but not to become the victims of extortion by speculators," she said.

The plaintiffs said her government needs to settle now.

"The time has come for Argentina to enter into good-faith negotiations with holdout bondholders," said Richard Samp, an attorney for the Washington Legal Foundation who has acted as a spokesperson for NML's position throughout the case.

"Argentina has expressed a desire to be permitted to re-enter financial markets around the world. The only way that it can do so is by coming to terms with its existing creditors."

Refusing to comply was "the best option" among a series of grim alternatives that Cleary, Gottlieb, the US law firm representing Argentina in Washington, presented to Fernandez ahead of the Supreme Court decision.

That guidance suggested Argentina should default on all its debts before negotiating in order to gain more leverage.

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